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Ford suffers decade-low dip of 12% amid inflation, supply constraints

Ford suffers decade-low dip of 12% amid inflation, supply constraints

American automobile giant, Ford Motor Co., reportedly saw its share plunge 12% as the stock market reacted to the company’s warning that its third-quarter earnings have been affected by supply constraints and inflationary pressures.

Yesterday, Ford’s stock was trading at $13.09 per share a closing, representing the biggest one-day hit that the automaker has suffered in more than 10 years.

Ford warned that inflation-related supplier costs might be around $1 billion more than what it initially expected in the third quarter. The company is expecting the adjusted earnings before interest and taxes to be between $1.4 to $1.7 billion for this quarter, in comparison to the $3.7 billion in the previous quarter and the $3 billion before that.

This estimate is also below the analysts’ consensus expectation by Wall Street.

Meanwhile, Ford expects to have a higher number of vehicles than what was originally planned, between 40,000-45,000, which have been assembled but are waiting for parts in the July-September quarter due to supply chain issues.

Among the vehicles awaiting parts include its SUVs and high-margin trucks.

However, the company reassured that its full-year guidance of adjusted EBIT will range from $11.5 billion to $12.5 billion.

This update has led to some investment analysts lowering their Q3 expectations for the automaker, while for others it came as a surprise of the slow rate of recovery from supply chain disruptions, which has caused much upheaval in the auto and other sectors.

Along with Ford, the broader US stock market also reported a decline, as Dow, Nasdaq, and S&P 500 indices dipped roughly 1%, while General Motors closed at around 6%.

Ford’s Q3 results will be posted next month on the 26th of October.

Morgan Stanley analysts said that Ford’s guidance of adjusted EBIT, between $1.4 to $1.7 billion, is half of what they had predicted. Deutsche Bank had also expected a higher adjusted EBIT for Q3, at around $2.93 billion.

During Q2 earnings, executives at Ford reported that the automaker had managed to cut down the inventory of vehicles waiting for parts from 53,000 to 18,000 at the beginning of the quarter.

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Meghna Singh

An English Literature graduate, Meghna Singh ventured into the profession of content development to incorporate her knack for writing articles across verticals including technology, healthcare, business, and alike for News Origins and Newsorigins. She has also completed her MBA in Tourism and worked as a content creator in the field of product development.